Case Studies
Parametric Insurance: An Alternative Business Interruption Solution
Situation: A technology firm with a unique exposure was unable to obtain business interruption from
the traditional property insurance market. Operations were highly concentrated and exposed to tornado risk.
Solution: The broker worked closely with the client to provide parametric insurance tornado
coverage, which would have been unobtainable for the client with traditional markets.
Outcome: The client achieved an alternative source of capacity and risk transfer that was not
considered by the traditional market.
Eliminating the Protection Gap with Parametric Insurance
Situation: A coastal municipality was uncomfortable with its traditional property policy sub-limits,
which had significantly limited recovery following a recent hurricane.
Solution: The broker designed a parametric hurricane policy to top-up the debris removal sub-limits,
while also providing funds to address beach erosion issues that were not remedied by the U.S. Federal Emergency
Management Agency.
Outcome: The client achieved a decreased risk burden on an already-thin budget. The parametric
solution also decreased the taxpayer burden and provided a more efficient use of capital.
Controlling Future Risks
Parametric insurance provides a different way to think about mitigating risk, especially if conventional products are
restricted, unavailable or not meeting an organization's needs. It serves as a strategic tool for companies to
partner with insurers to help solve complex business challenges — and ultimately provide organizations with more
transparency and better control.
“This is all about addressing the protection gap in a hard market,” says Peter Lacovara, managing director in Aon’s
Alternative Risk Transfer and Innovation practice. “The hard market is not just about price, but terms and
conditions, too. And parametric, for all intents and purposes, does not have terms and conditions, deductibles,
exclusions or sub-limits — and that’s where it shines. All those things that get tightened up when carriers get more
sensitive to how they deploy capital make parametric more effective in a hard market.”
Aon's Thought Leaders
Michael Gruetzmacher
Head of Alternative Risk Transfer and Innovation
Aon Commercial Risk Solutions, North America
Peter Lacovara
Managing Director, Alternative Risk Transfer and Innovation
Aon Commercial Risk Solutions, North America
Colin Harper
Managing Director, Alternative Risk Transfer and Innovation
Aon Commercial Risk Solutions, North America
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